What Types of Notices Can Taxpayers Receive From the IRS?

 Posted on March 11, 2021 in Tax Audits

Taxes are a reality that most U.S. citizens and residents need to deal with, and understanding the various tax laws that apply to a person or business can often be a complicated matter. If a taxpayer makes mistakes or oversights when filing tax returns or other tax documents, they could face penalties from the Internal Revenue Service (IRS). Being contacted by the IRS may cause taxpayers to worry that they will be subject to these types of penalties. However, not every piece of communication from the IRS will result in penalties, and taxpayers will want to understand the different types of notices that the IRS may send and their options for responding and addressing or correcting tax issues.

IRS Letters and Notices

Communications from the IRS can generally be grouped into one of the following categories:

• Soft letters - In some cases, the IRS may identify potential issues that may affect certain taxpayers and send notice reminding the taxpayer of the actions they can take to ensure that they are in compliance with tax laws and avoid potential penalties. In some cases, the IRS may request that a taxpayer provide certain types of information or file amended tax returns. In recent years, the IRS has sent soft letters related to issues such as reporting virtual currency transactions or filing the proper forms related to foreign accounts or investments.

• Audit notices - The IRS may choose to perform a tax audit in which a taxpayer will be subject to an examination of one or more issues on a tax return or other tax forms they have filed. Audits may be focused on a specific error, or they may take a more general look at a taxpayer’s income and assets to determine whether they match up with the information reported to the IRS. The initial notification of an audit will be sent by mail, and a notice may request that a taxpayer provide certain information or financial records, or it may include contact information and instructions for scheduling in-person interviews.

• Penalty notices - If the IRS has determined that a taxpayer has not reported information correctly on a tax return or other tax forms, it may choose to issue a penalty without the need to conduct an audit. In these cases, the IRS will send a notice informing the taxpayer of the penalty and the amount owed, along with instructions for how payment can be made. If the taxpayer does not make payment arrangements, the IRS may take collection actions, such as garnishing a taxpayer’s wages, placing a lien on their property, or intercepting future tax refunds. In some cases, taxpayers may qualify for penalty abatement due to their compliance history or if they can show reasonable cause for why they did not comply with the IRS’s requirements.

Contact Our San Jose, CA Tax Lawyer

If you have received any of the above notices from the IRS, you will want to take immediate action to avoid potential penalties or determine how you can minimize the amount you will be required to pay. At John D. Teter Law Offices, we can advise you of your options in these cases, and we can provide you with legal representation as you work to resolve your tax issues. To learn more about how we can help, contact our San Jose tax audit attorney at 408-866-1810.

Sources:

https://www.irs.gov/pub/notices/letter_6173.pdf

https://www.irs.gov/businesses/small-businesses-self-employed/irs-audits

https://www.irs.gov/pub/irs-pdf/n746.pdf